EUR/USD Forecast: Euro bulls retain control after correction
- EUR/USD recovers above 1.1650 after closing in the red on Thursday.
- The technical picture suggests that the bias remains bullish in the short term.
- Markets await PCE inflation and consumer sentiment data from the US.
Following the bullish action seen in the first half of the week, EUR/USD reversed its direction and closed in negative territory on Thursday. The pair holds its ground early Friday and trades marginally higher on the day, above 1.1650.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.91% | -0.90% | -0.21% | -1.31% | -0.80% | -0.07% | |
| EUR | 0.54% | -0.36% | -0.36% | 0.31% | -0.77% | -0.27% | 0.47% | |
| GBP | 0.91% | 0.36% | 0.27% | 0.68% | -0.41% | 0.10% | 0.84% | |
| JPY | 0.90% | 0.36% | -0.27% | 0.67% | -0.43% | 0.08% | 0.82% | |
| CAD | 0.21% | -0.31% | -0.68% | -0.67% | -1.13% | -0.59% | 0.16% | |
| AUD | 1.31% | 0.77% | 0.41% | 0.43% | 1.13% | 0.51% | 1.25% | |
| NZD | 0.80% | 0.27% | -0.10% | -0.08% | 0.59% | -0.51% | 0.74% | |
| CHF | 0.07% | -0.47% | -0.84% | -0.82% | -0.16% | -1.25% | -0.74% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Upbeat data releases from the US helped the US Dollar stage a modest rebound on Thursday and caused EUR/USD to edge lower.
Challenger, Gray & Christmas' monthly publication showed that planned job cuts declined 53% from October to 71,321 in November. Additionally, the US Department of Labor (DoL) reported that the number of first-time applications for unemployment benefits declined to 191,000 from 218,000 in the previous week, marking the lowest print since September 2022 and coming in better than the market expectation of 220,000.
Nevertheless, the USD struggles to preserve its recovery momentum as the CME Group FedWatch Tool still shows about a 90% probability of a 25 basis points (bps) Federal Reserve (Fed) rate cut in December, even after the upbeat data.
On Friday, the US economic calendar will feature the Personal Consumption Expenditures (PCE) Price Index. Although this data is seen as a key indicator of inflation that guides the Fed in policymaking, it is unlikely to trigger a market reaction since it will be for September.
Later in the day, the University of Michigan (UoM) will publish the Consumer Sentiment Index data for December. While a noticeable improvement could support the USD heading into the weekend, investors could refrain from betting on a steady USD rebound ahead of next week's Fed meeting.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) rises above the 50-, 100- and 200-period SMAs, with all slopes pointing higher and price holding above them. The 20 SMA at 1.1646 offers nearby dynamic support. The Relative Strength Index (14) stands at 59, maintaining a neutral-to-bullish tone.
Measured from the 1.1885 high to the 1.1474 low, Fibonacci retracements cap the rebound, with the 50% retracement at 1.1680 acting as resistance. A break above would expose the 61.8% retracement at 1.1728. Failure to clear the barrier could keep the pair contained intraday. On the downside, the ascending trend line and the Fibonacci 38.2% retracement form a strong support area at 1.1630 ahead of 1.1580-1.1570 (200-period SMA, Fibonacci 23.6% retracement).
(The technical analysis of this story was written with the help of an AI tool)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
